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For 1st Time Since April, Mortgage Rates Dip Below 5%

Steve Goode
Aug 04, 2022
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The 30-year fixed-rate mortgage down 31 basis points from a week ago.

Freddie Mac says mortgage rates slid to 4.99% this week, the first time since April they've been below 5%.

Freddie Mac on Thursday released its weekly Primary Mortgage Market Survey report, which shows that fixed mortgage rates remained volatile due to a tug of war between inflationary pressures and a clear slowdown in economic growth, according to Freddie Mac Chief Economist Sam Khater.

“The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, especially as the Federal Reserve attempts to navigate the current economic environment,” Khater said.

The last time mortgage rates were in the fours was the week of April 7, when they stood at 4.72%.

According to the report:

  • The 30-year fixed-rate mortgage averaged 4.99% with an average 0.8 point as of Aug. 4, 2022, down from last week when it averaged 5.3%. A year ago at this time, the 30-year FRM averaged 2.77%.
  • The 15-year fixed-rate mortgage averaged 4.26% with an average 0.6 point, down from last week when it averaged 4.58%. A year ago at this time, the 15-year FRM averaged 2.10%.
  • The 5-year Treasury-indexed hybrid adjustable rate mortgage (ARM) averaged 4.25% with an average 0.3 point, down from last week when it averaged 4.29%. A year ago at this time, the 5-year ARM averaged 2.40%.

The survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.

George Ratiu, manager of economic research, said Thursday that a raft of surprisingly positive economic indicators counterbalanced the drumbeat of recessionary chatter, with factory orders outpacing market expectations, as did the ISM service sector data. 

“However, the number of job openings softened, even as the labor market remained tight," Ratiu said. "Capital markets are seeking a stronger directional signal about economic activity amid the push-and-pull of consumer spending and business investments. While underlying economic conditions show resilience, the recession narrative is playing an important role in market psychology and investor expectations, as we see the sharp upward push in rates moderate more visibly.”

On the consumer side, Ratiu said this week’s Federal Reserve release showed that Americans continue spending,  evidenced by the record $16.2 trillion in household debt. 

“The numbers underscore considerable spending on housing, through higher mortgage burdens, and goods and services, through credit card charges,” he said. “The big question for consumers is whether companies will overreact to the recession concerns and start trimming payrolls. A sharp pullback in hiring could have a direct impact on people’s ability to keep spending, especially with today’s high inflation."

For housing, Ratiu said, the combination of high prices and higher interest rates is driving a reset in fundamentals. “With borrowing costs setting an affordability ceiling for many buyers, home sales are dropping,” he said “In addition, as many homeowners rushed into summer ready to list their property and capture the equity brought about by record-high prices, inventory has improved. This brought a welcome sign in this year’s real estate markets — price cuts.”

Ratiu added that’s most recent data showed that some homeowners may feel they missed the market’s peak and are holding back on listing. 

“As the number of new listings softens," he said, "it raises the concern that the nascent improvement in inventory may prove elusive as we approach the latter stages of summer.”

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